Monthly Tax E-News – October 2018

Welcome to our latest Monthly Tax E-News. We hope you enjoy reading it and find it useful.

LHP NEWS

Firstly, a warm welcome to our newest senior accountant Eleri Quan, who has joined us at our Carmarthen Office.

A big thank you to all who attended our Macmillan Coffee Morning on Friday the 28th September. It was a very successful morning, all thanks to Yr Atom and Cariad Coffee for their contributions. We raised £363.96 for the wonderful Macmillan Cancer Support Charity.

We will be attending the Welsh Dairy Show on October 30th, which is taking place at the United Counties Show ground. Pop along to see us!

IN THIS ISSUE:

CLASS 2 NICs TO CONTINUE FOR SELF-EMPLOYED

CHECK YOUR CONTRIBUTION HISTORY

IT CONSULTANT WINS IR35 PERSONAL SERVICE COMPANY CASE

TAX EFFICIENT CHILDCARE SCHEMES

ADVISORY FUEL RATE FOR COMPANY CARS

DON’T FORGET THERE MAY BE TAX TO PAY ON YOUR DIVIDENDS IN JANUARY

DIARY OF MAIN TAX EVENTS OCTOBER / NOVEMBER 2018

CLASS 2 NICs TO CONTINUE FOR SELF-EMPLOYED

In 2016 the government consulted on a proposed abolition of Class 2 National Insurance contributions (NICs) for the self-employed. This flat rate contribution, currently £2.95 a week is payable by the self-employed in addition to Class 4 contributions based on the level of profits. The flat rate contributions were due to cease on 5 April 2019 but will now continue “for the life of this parliament”.

The reason for the u-turn concerns businesses owners with low profits or making losses. In order to maintain their NI Contribution record, many self-employed individuals voluntarily continue to pay Class 2 contributions despite their profits being below the £6,205 small earnings exemption. Having a full NI contribution history helps maximize an individual’s entitlement to State Benefits. For example full State Pension entitlement requires 35 years contributions.

With the abolition of Class 2 NICs, those with low profits or making losses would need to make voluntary Class 3 contributions (currently £14.65 a week, £761.80 a year) in order for that year to count as a contribution year.

CHECK YOUR CONTRIBUTION HISTORY

As mentioned above, in order to maximise entitlement to full State Benefits a full contribution record Is required. It is possible to check your National Insurance record online to see:

what you’ve paid, up to the start of the current tax year (6 April 2018)

The government have been consulting on extending the personal service company rules that currently apply to public sector workers to those in the private sector, but in the meantime tax tribunal decisions are still being decided against HMRC.

In a recent case involving an IT consultant working on various projects to implement the new Universal Credit system the First Tier Tax Tribunal decided that the consultant would not have been an employee if directly engaged. A key factor was that the the level of control over the consultant fell far below the sufficient degree required to demonstrate a contract of service.

TAX EFFICIENT CHILDCARE SCHEMES

Earlier this year the government announced that no new childcare voucher schemes could be set up after 5 October 2018. This was a six month extension from the previous 5 April 2018 end date. If those employers offering such schemes at 5 October are prepared to keep administering their scheme then they will continue to be available but will eventually be phased out.

The current scheme allows employers to provide vouchers to employees to pay for care of their children up age 16. Vouchers to the value of £55 a week can be provided tax free to basic rate taxpayers with differing tax free amounts for higher rate and additional rate taxpayers.

The replacement scheme is the government’s “tax free” childcare account which started this year for children up to age 12. Under this scheme the government tops up the savings in the childcare account by 25% up to £2,000 per child per year (£4,000 for a disabled child).
Thus, savings of £8,000 would be topped up by the government to £10,000 and the £10, 000 could then be used to pay Ofsted registered childcare providers such as nursery fees, childminders, after school clubs and summer camps.
Unlike childcare vouchers, the new childcare accounts will be available to both employees and the self-employed.

For those already in childcare voucher schemes it may be beneficial to switch to the new childcare account and we can help you calculate whether or not that would be beneficial.

ADVISORY FUEL RATE FOR COMPANY CARS

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 September 2018.

Where there has been a change the previous rate is shown in brackets.

Engine Size

Petrol

Diesel

LPG

1400cc or less

12p (11p)

7p

1600cc or less

10p

1401cc to 2000cc

15p (14p)

9p

1601 to 2000cc

12p (11p)

Over 2000cc

22p

13p

13p (14p)

You can continue to use the previous rates for up to 1 month from the date the new rates apply.

For hybrid cars use the equivalent petrol or diesel rate. However, for wholly electric cars there is a new 4p advisory rate from 1 September 2018.

DON’T FORGET THERE MAY BE TAX TO PAY ON YOUR DIVIDENDS IN JANUARY

The rules for taxing dividends changed radically from 6 April 2016 with the removal of the 10% notional tax credit and the introduction of new rates of tax on dividends. For many taxpayers that meant more tax to pay on those dividends on 31 January 2018. The same will also apply on 31 January 2019.

If you are a higher rate taxpayer and received £30,000 of dividends in 2017/18 £25,000 of those dividends would be taxed at 32.5% meaning £8,125 due on 31 January 2019.

If you can let us have all of your tax documents as soon as possible we can let you know how much tax you need to pay next January so that you can set aside sufficient funds.

Diary of Main Tax Events

Date

Event

01/10

Corporation tax for year to 31/12/17, unless quarterly instalments apply

05/10

Deadline for notifying HMRC of chargeability for 2017/18 if not within Self-Assessment and receive income or gains on which tax is due

19/10

PAYE & NIC deductions, and CIS return and tax, for month to 5/10/18 (due 22/10 if you pay electronically)

1/11

Corporation tax for year to 31/01/18, unless quarterly instalments apply

19/11

PAYE & NIC deductions, and CIS return and tax, for month to 5/11/18 (due 22/11 if you pay electronically)

We hope you enjoyed reading this newswire. Remember we are here to help you, so please contact us if you need further information on any of the topics covered.

As you know we love receiving referrals, so if you know of anyone who might find this newswire valuable, then please forward it on to them.

Testimonials

Wish I had Xero 20 years ago.

Chris James - Pharmacist Director at Walter Lloyd & Son Ltd

When in business, one needs a great accountant. Eirian of LHP has offered just that.
The daunting experience of setting up in business was made significantly easier through LHP’s support and guidance.
The company’s strengths are their understanding of the farming industry, their attention to detail and their personal and professional service.
I have no hesitation in recommending LHP accountants as I consider Eirian to be a valued member of the team.

Samuel Carey, Milkwell Ltd.

From the moment that I transferred my accounting to LHP I felt they had my best interests at heart. They are committed to helping you understand the best ways to manage elements of your business, as well as taking the time to understand your business. The information is clear, concise and delivered in a friendly informative manner.

When you are busy doing what you do best, it make good economic sense to let them do what they do best – save you money! Highly recommended and trusted firm of a…

Sarah Ray, Design Marque - Graphic Designer

I am very pleased about the accountancy services you have provided me over last several years. I understand the difference it made comparing service I received from previous accountant of another local company. What I find especially important is your easy accessibility, quick appointments, fast reply to emails which puts my mind at ease as things are then dealt with and sorted.

The accounts are prepared in a timely manner efficiently including dealing with queries from taxman which could be …

We value LHP’s advice and the efficient way they undertake responsibility of the accounts and their knowledge of farming in invaluable together with the pleasant manner in which they conduct their business.

Messrs Brown, Lower Llantydwel, Tavernspite - Dairy Farmer

We would like to take this opportunity of expressing our appreciation of our accountants LHP, and thanking them for taking good care of our business over a great number of years. As a family, we are the third generation with LHP, and that in itself speaks volumes.

Messrs Jones, Gilfach, Llangain - Dairy and Beef Farmers

We are a local construction company and have been using LHP for a few years. We find them to be very efficient and accessible. They are extremely pro active and give excellent advice on both accountancy and taxation matters for our business. All the staff that we have dealt with in the office are friendly and extremely knowledgeable and it is important to us that the majority of them speak Welsh.

Fabricators and erectors of steel framed buildings

S J Construction (Gwili) Ltd

Having been clients of LHP for the last 17 years or so I regard them as friends who have my best interests at heart. During this time I have always found them to be efficient, friendly and courteous and they have been extremely helpful with sound financial advice on many fronts ranging from taxation to investments.

I look forward to the association with LHP for many years to come.

Tim Lewis -West Wales Dental and Implant Clinic

A large specialised building supplies company based in Cardiff requiring fully compliant ISA audit.

As a national company, trading in a highly dynamic market we required a firm of auditors who both understood our business environment and who could make a genuine contribution to our success.

LHP have more than exceeded our expectations in all these areas and have proven to become an extremely valued and trusted business adviser.

Blue Bay Building Products Ltd

Excellent professional and practical advice on all aspects of my business and personal tax affairs – no problem is too great or too small for them to resolve.

Evans and Davies Solicitors - Solicitors Aberaeron and of The Hive Aberaeron.